VCs Push for "Disruptive Innovation" at GoingGreen

Two of the best-know venture capital investors spoke at the Always On Going Green conference this afternoon, with both Steve Jurveston of Draper Fisher Jurvetson and Vinod Khosla of Khosla Ventures very positive on cleantech investments, but taking very different views on the specifics.

Two of the best-know venture capital investors spoke at the AlwaysOn GoingGreen conference this afternoon, with both Steve Jurveston of Draper Fisher Jurvetson and Vinod Khosla of Khosla Ventures very positive on cleantech investments, but taking very different views on the specifics.

Jurveston talked about how he thought entrepreneurship drives all major changes on the planet. He said two-thirds of Dow Jones Industrial Average companies were founded during a recession. (Based on the companies he showed on the chart, including Microsoft, I'm not sure this is strictly true.) He said technology improvements didn't care about recessions, and pointed to Ray Kurzweil's expanded version of a Moore's Law chart to illustration how technology innovation is growing exponentially.

He said technology has now grown to a point where it was now ready to really change energy. And he pointed to Tesla Motors (of which his firm is a significant investor) as a example of how it has created an engine that is much more efficient than conventional ones. But he pointed more to China, where he said there are already 120 million electric vehicles made by over 1000 vendors on the streets today. These are mostly e-bikes and electric scooters, and he said the market really took off after SARS when many people decided they didn't want to take the bus. Many of the 1000 vendors are now creating "4 wheel electric vehicles" that sell for 2,000 to 5,000 dollars. And he said that this "bottoms-up" competition with traditional cars was equivalent to PCs competing with mainframes 30 years ago.

Jurveston also talked about other areas, such as industrial biotechnology, such as Synthetic Genomics and Genomatica (which presented earlier in the conference - I'll have more on that later). He said Genomatica created an organism it didn't really completely understand, quoting Danny Hillis on mankind's ability to create products beyond our engineering capability.

Kholsa, who was interviewed by Mark Fischetti, editor of Scientific American, made a case that most companies and most investors aren't thinking about radical enough changes.

When asked which clean technologies scale, he said what we really need is storage, but storage hasn't yet started to scale. We need something radical, but he believes it will happen. Solar is coming along he said, with the market growing but prices not falling fast enough to reach unsubsidized parity. He said it's mostly the fault of investors trying to do marginal things, not radical things.

Kholsa said the most interesting area to him was biofuels, and he talked about how companies were beginning to file for IPOs. He said half a dozen technologies will make economic sense - both with and without subsidies - in the next couple of years.

Asked about a statement he made saying "Don't invest in cleantech, invest in maintech," Khlosa said he believed in taking more risk vs. trying to chase First Solar in thin-film solar, and said his firm was looking at doing things like engines and air-conditioning with solar power. He said that aiming at subsidized solar was just aiming at a niche market.

He said what works are technologies that can get to unsubsidized market competitiveness within seven years of starting to scale - because that's what it takes to work.

He said in biotech, for instance, the initial plants might not be economic today, but as more plants get built, the economies of scale will kick in. That will lower costs so that it will become competitive with oil, and then less expensive. By 2030, he expects the price of oil in 2006 dollars will be $30 a barrel - because oil will face so much competition.

He said he has looked at a lot of business plans from Algae companies, but hasn't seen one where he thinks the economics work; or where he can see what process improvements would let it.

In one of his more controversial statements, Khlosa repeated his belief that most environmentalists were getting in the way of the transition to greener technologies, saying economics always trumps environmental concern. He talked how a $20,000 battery doesn't work in a car. He said the Chevy Volt would only sell 40,000 units, while the Tata Nano had 200,000 orders the first day.

Khlosa believes today's lithium-ion batteries will be extinct in 15 years. He said his companies were working on alternative technologies, and he didn't know what would work - but that the winner is likely to be something that is seen as impossible today.

He said the winner would be something that offers a radical improvement - not something that has a high-probability of success. He said he believes in the "black swan" theory of investing, looking for technologies that have a 90 percent chance of failure, but if they succeed could really change things.

But he said he believes Cleantech investing makes sense. He said he thinks the economics are very comparable to IT or biotech investing in the 80s and 90s.

Michael J. Miller's Forward Thinking Blog: forwardthinking.pcmag.com
Michael J. Miller is chief information officer at Ziff Brothers Investments, a private investment firm. From 1991 to 2005, Miller was editor-in-chief of PC Magazine, responsible for the editorial direction, quality and presentation of the world's largest computer publication.
Until late 2006, Miller was the Chief Content Officer for Ziff Davis Media, responsible for overseeing the editorial positions of Ziff Davis's magazines, websites, and events. As Editorial Director for Ziff Davis Publishing since 1997, Miller took an active role in...
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